Free loans to your customers ...!07th October 2009
For some reason in the UK the norm seems to be 30 days or current month 30 days, and that is after you have raised the invoice. Often these days it seems to be even longer, 60 days, 90 days ...
Every time you make a sale and then raise an invoice (hopefully immediately!) you have to wait for your money.
You are therefore in effect lending your money to your customer ...in the often vague hope that you will be paid. And in lending this money what have you actually done about making sure you do get paid?
Most businesses in our experience do very little to ensure they can collect their money and on time, which when you think about it is pretty staggering! Remember, you are making:
- An interest free loan
- With no security
- No guarantee of payment
- To someone you probably know very little about
- With often no signed contract or terms of payment
- And no real penalty if they pay late!
How many banks do you know that you can get terms like that from? Yet your customer has you lending them your money on those terms!!
So, just give it a little thought. Check out your customers and ensure they are credit worthy. You may have little choice but to give credit if you want to trade in your market, but you do have a choice on being paid on time!
We have a useful fact sheet on credit management. E-mail me if you would like a copy!